A. Calculate the after-tax cost of debt for a firm, which has a 40% marginal tax rate and a pre-tax cost of debt of 12%.
B. American Manufacturing, Inc. has issued preferred stock at its $125 per share par value. The stock will pay a $15 annual dividend. The cost of issuing and selling the stock was $4 per share, which was paid to the firm’s investment banker. Calculate the cost of this preferred stock on a percentage basis.
C. Calculate the cost on a percentage basis of new common stock equity for Tangshan Mining if the firm just paid a dividend of $4.00, the stock price is $50.00, dividends are expected to grow at 8% indefinitely, and flotation costs are $5.00 per share.